India: Master File Compliance beginning with the financial year 2016/17


Published on July 27, 2017


An entity (including a permanent establishment) being part of an international group and which has entered into international transaction(s), have to also require to maintain and furnish the master file beginning with the financial year 2016/17. The matters to be contained in the master file, the applicability threshold (if any), the due date for submission and the authority with whom the said master file needs to be submitted is not yet notified. Non-furnishing of the said master file within the prescribed due date would attract a penalty of INR 0.50 mio. The details to be maintained under master file are expected to be in line with those prescribed under OECD-BEPS Action 13.


The OECD-BEPS Action 13 plan sets out a three-tiered standardized approach to TP documentation which consists of the following:
  • Country by country report of income, earnings, taxes paid and certain economic measures etc.
  • Master file containing standardized information relevant for all MNE group members.
  • Local file referring intra group transactions of the local taxpayer


Contents of Master File as per OECD Guidelines

Action 13 recommends that the master file should provide an overview of the MNE group business, the nature of its global business operations, its overall transfer pricing policies, and its global allocation of income and economic activity in order to place the MNE group’s TP practices in their global economic, legal, financial and tax context.
  • Organizational structure
    Chart illustrating the MNEs legal and ownership structure and geographical location of operating entities.
  • Description of MNE’s business
    • General written description of the MNE’s business
    • Important drivers of business profit
    • A description of the supply chain for the group’s five largest products and/or service offerings by turnover plus any other products and/or services amounting to more than 5 percent of group turnover. The required description could take the form of a chart or a diagram;
    • A list and brief description of important service arrangements between members of the MNE group, other than research and development (R&D) services, including a description of the capabilities of the principal locations providing important services and transfer pricing policies for allocating services costs and determining prices to be paid for intra-group services;
    • A description of the main geographic markets for the group’s products and services that are referred to in the second bullet point above;
    • A brief written functional analysis describing the principal contributions to value creation by individual entities within the group, i.e. key functions performed, important risks assumed, and important assets used;
    • A description of important business restructuring transactions, acquisitions and divestitures occurring during the fiscal year.


  • MNE’s intangibles (as defined in Chapter VI of OECD Guidelines)
    • A general description of the MNE’s overall strategy for the development, ownership and exploitation of intangibles, including location of principal R&D facilities and location of R&D management.
    • A list of intangibles or groups of intangibles of the MNE group that are important for transfer pricing purposes and which entities legally own them.
    • A list of important agreements among identified associated enterprises related to intangibles, including cost contribution arrangements, principal research service agreements and license agreements.
    • A general description of the group’s transfer pricing policies related to R&D and intangibles.
    • A general description of any important transfers of interests in intangibles among associated enterprises during the fiscal year concerned.


  • MNE’s intercompany financial activities
    • A general description of how the group is financed, including important financing arrangements with unrelated lenders.
    • The identification of any members of the MNE group that provide a central financing function for the group, including the country under whose laws the entity is organized and the place of effective management of such entities.
    • A general description of the MNE's general transfer pricing policies related to financing arrangements between associated enterprises.


  • MNE’s financial and tax positions
    • The MNE’s annual consolidated financial statement for the fiscal year concerned if otherwise prepared for financial reporting, regulatory, internal management, tax or other purposes.
    • A list and brief description of the MNE group’s existing unilateral advance pricing agreements (APAs) and other tax rulings relating to the allocation of income among countries.


Indian Regulations on Master File
The Finance Act 2016, has introduced Master File Concept in India with effect from the financial year 2016/17. Accordingly, an entity (including a permanent establishment) being part of an international group and which has entered into an international transaction, needs to comply with the master file provisions.
The Indian TP Law has yet to notify the details to be included in the Master File. However, it is expected to be in line with BEPS Action 13. Following are the key aspects with regard to master file:
  • There is no filing threshold prescribed as of now. Therefore, all entities to whom the TP law is applicable, will have to maintain the Master File.
  • The form and the due date for preparation of the master file for the period covering the financial year 2016/17 is not yet prescribed. However, the local file is to be prepared on a contemporaneous basis (by Nov 30, 2017 for FY 2016/17), which would be prepared based on the matters referred to in the master file.
  • The Master File is required to be filed with the ”prescribed authority” by the ”prescribed date”. The due date as well as the prescribed authority for submission of the Master File, are not yet notified.
  • Penalty for not furnishing the master file with the prescribed authority is INR 0.5 million.




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